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The competitive strategy game is a simulation of the competitive interaction
between eight companies that compete with one another in one or more of four different markets.
The markets differs in size, market elasticity of demand, degree of product differentiation,
ability to store the product, capital intensity of production, and the degree to which investments
are sunk. In a given market, the companies have different costs of production -- entry costs,
capital costs, and marginal costs. One firm may be the most efficient manufacturer in market A,
but may face the highest costs of entering market B. One market may be hospitable to many of the
companies at once, while another may offer a profitable opportunity to no more than one incumbent.
Each company is controlled by a team of students who decide which markets to enter,
how much capacity to build, when to reduce capacity or exit a market, what quantities to produce
and what prices to charge. In each period, each company submits a strategy specifying these variables.
The markets then operate for the period. At the end of each period, every team receives a market
update --- which has public information on prices, capacities, and approximate market sales, ---
and a company update --- which has the relevant income statement and balance sheet information,
such as capacity, production, sales, inventory, capacity costs, variable costs, interest paid or
earned on cash balances, and cash position.
An important aspect of the Competitive Strategy Game is the role of information. Some
data are public information, such as all firms' prices and production capacities, the degree of
substitutability across brands within each market, and some basic information about demand. Other
variables are known only with some noise. For instance, each firm knows its own sales in each market,
but the total sales in each market is known publicly only with a degree of error. Similarly, no firm
knows the production costs of its competitors with certainty, but it does know the distribution from
which costs are drawn.
Each firm begins with a cash reserve and makes strategic decisions in an attempt to maximize
the value of the firm. The CSG is useful for teaching basic economic concepts such as sunk, fixed, and
marginal costs, the opportunity cost of investment, firm- and market-elasticities of demand, and product
differentiation. It also is immediately applicable to discussions of entry deterrence, first-mover advantages,
preemption, competitive advantage, predation, oligopoly coordination, multimarket contact, signaling,
information asymmetries, and end game issues in finitely repeated games. For more information, you can
view or download the instructor's manual
in Adobe Portable Document Format (PDF).
In order to run the CSG using this Web page for strategy submissions, you need to have CSG
version 3.50 on your PC. You can obtain a free copy by contacting Severin Borenstein by
email. In a typical one-semester course, the game can be
played for 15-20 periods, slightly less for a one-quarter course. Since its creation in 1994, the CSG has
been used at over 75 colleges and universities in more than 20 countries. For a list of schools,
click here. In advanced courses, ``data''
from the game can be used as the basis for estimating demand functions, Nash equilibria, and competitive behavior.
Sample homework assignments that lead students through these exercises are available.
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University of California, Berkeley |
Haas School of Business